1 Reynoso vs CA

FACTS:Reynoso was the branch manager of Commercial Credit Corporation Quezon City (CCC-QC), a
branch of Commercial Credit Corporation (CCC). It was alleged that Reynoso was opposed to certain
questionable commercial practices being facilitated by CCC which caused its branches, like CCC-QC, to
rack up debts. Eventually, Reynoso withdrew his own funds from CCC-QC. This prompted CCC-QC to file
criminal cases for estafa and qualified theft against Reynoso. The criminal cases were dismissed and
Reynoso was exonerated and at the same time CCC-QC was ordered to pay Reynosos counterclaims
which amounted to millions. A writ of execution was issued against CCC-QC. The writ was opposed by
CCC-QC as it now claims that it has already closed and that its assets were taken over by the mother
company, CCC.
Meanwhile, CCC changed its name to General Credit Corporation (GCC).
Reynoso then filed a petition for an alias writ of execution. GCC opposed the writ as it argued that it is a
separate and distinct corporation from CCC and CCC-QC, in short, it raises the defense of corporate
fiction.
ISSUE: Whether or not GCC is correct.
HELD:
A corporation is an artificial being created by operation of law, having the right of succession and the
powers, attributes, and properties expressly authorized by law or incident to its existence. It is an
artificial being invested by law with a personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to which it may be related. It was evolved to
make possible the aggregation and assembling of huge amounts of capital upon which big business
depends.
In this case, the veil of corporate fiction must be pierced. It is obvious that CCCs change of name to GCC
was made in order to avoid liability. CCC-QC willingly closed down and transferred its assets to CCC and
thereafter changed its name to GCC in order to avoid its responsibilities from its creditors. GCC and CCC
are one and the same; they are engaged in the same line of business and single transaction process, i.e.
finance and investment. When the mother corporation and its subsidiary cease to act in good faith and
honest business judgment, when the corporate device is used by the parent to avoid its liability for
legitimate obligations of the subsidiary, and when the corporate fiction is used to perpetrate fraud or
promote injustice, the law steps in to remedy the problem. When that happens, the corporate
character is not necessarily abrogated. It continues for legitimate objectives. However, it is pierced in
order to remedy injustice, such as that inflicted in this case.